500 U.S. 322, 111 S. Ct. 1842 (1991)
In 1987, respondent Dr. Simon J. Pinhas filed a complaint in District Court alleging that petitioners Summit Health, Ltd. (Summit), Midway Hospital Medical Center (Midway), its medical staff, and others had entered into a conspiracy to drive him out of business so that other ophthalmologists and eye physicians including four of the petitioners would have a greater share of the eye care and ophthalmic surgery in Los Angeles.1 Among his allegations was a claim that the conspiracy violated § 1 of the Sherman Act, 15 U.S.C. § 1.2 The District Court granted defendants' motion to dismiss the First Amended Complaint without leave to amend, but the United States Court of Appeals for the Ninth Circuit reinstated the antitrust claim.3
Respondent, a diplomate of the American Board of Ophthalmology, has earned a national and international reputation as a specialist in corneal eye problems.4 Since October 1981, he has been a member of the staff of Midway in Los Angeles, and because of his special skills, has performed more eye surgical procedures, including cornea transplants and cataract removals, than any other surgeon at the hospital.5 Prior to 1986, most eye surgeries in Los Angeles were performed by a primary surgeon with the assistance of a second surgeon.6
In February of 1986, the administrators of the Medicare program announced that they would no longer reimburse physicians for the services of assistants, and most hospitals in southern California abolished the assistant surgeon requirement.7 Respondent and other ophthalmologists asked Midway to abandon the requirement, but the medical staff refused to do so.8 Respondent explained that because Medicare reimbursement was no longer available, the requirement would cost him about $60,000 per year in payments to competing surgeons for assistance that he did not need.9 Although respondent expressed a desire to maintain the preponderance of his practice at Midway, he nevertheless advised the hospital that he would leave if the assistant surgeon requirement were not eliminated.10
Petitioners responded to respondent's request to forgo an assistant in two ways.11 First, Midway and its corporate parent offered respondent a sham contract that provided for payments of $36,000 per year, later increased by oral offer to $60,000, for services that he would not be asked to perform.12 Second, when respondent refused to sign or return the sham contract, petitioners initiated peer review proceedings against him and summarily suspended, and subsequently terminated, his medical staff privileges.13 The proceedings were conducted in an unfair manner by biased decisionmakers, and ultimately resulted in an order upholding one of seven charges against respondent, and imposing severe restrictions on his practice.14 When this action was commenced, petitioners were preparing to distribute an adverse report about respondent that would preclude him from continued competition in the market place, not only at defendant Midway Hospital but also in California, if not the United States.15
Petitioner Summit owns and operates 19 hospitals, including Midway, and 49 other health care facilities in California, six other States, and Saudi Arabia.16 Summit, Midway, and each of the four ophthalmic surgeons named as individual defendants, as well as respondent, are all allegedly engaged in interstate commerce.17 The provision of ophthalmological services affects interstate commerce because both physicians and hospitals serve nonresident patients and receive reimbursement through Medicare payments.18 Reports concerning peer review proceedings are routinely distributed across state lines and affect doctors' employment opportunities throughout the Nation.19 The Ninth Circuit rejected petitioners' argument that there was no allegation that interstate commerce would be affected by respondent's removal from the Midway medical staff.20 The Supreme Court granted certiorari to consider petitioners' contention that the complaint fails to satisfy the jurisdictional requirements of the Sherman Act.21
Whether the interstate commerce requirement of antitrust jurisdiction is satisfied by allegations that petitioners conspired to exclude respondent, a duly licensed and practicing physician and surgeon, from the market for ophthalmological services in Los Angeles because he refused to follow an unnecessarily costly surgical procedure?22
Under 15 U.S.C. § 1, the interstate commerce jurisdictional requirement is satisfied if the alleged conspiracy, if successful, would have a substantial effect on interstate commerce as a matter of practical economics, focusing on potential harm rather than actual consequences.23
Yes. The complaint alleges a conspiracy by Summit, which operates hospitals and facilities across multiple states including California, six other states, and Saudi Arabia, to exclude Dr. Pinhas from the market for ophthalmological services at Midway and other hospitals through misuse of the peer review process.24 As a matter of practical economics, successful exclusion would reduce the provision of ophthalmological services that serve nonresident patients and generate Medicare reimbursements from out-of-state sources, establishing the required nexus with interstate commerce without any need to show actual effect or that the restraint targeted the flow of commerce itself.25
The interstate commerce requirement of antitrust jurisdiction is satisfied.26
Related opinions on this issue
Justice Scalia dissented on the ground that the majority misapplied the jurisdictional inquiry by focusing on the market from which Dr. Pinhas was excluded rather than the effect of the particular restraint at issue.27 He argued that the complaint describes only a local price-padding scheme at Midway Hospital with no alleged substantial impact on interstate commerce, such as effects on out-of-state patients, insurance payments, or supplies.28 Scalia maintained that pre-McLain precedent required showing the restraint itself would substantially affect interstate activity, which the facts do not support.29